Project Sansar: Market Prices

A thread in the Second Life™ forum starts with the OP asking what prices will be for goods in the new Project Sansar world. That is something we would all like to know. I’ll collect and expand on some of the thoughts from that thread.

Breaking bad💵💵💵💵

Breaking bad💵💵💵💵

I think many have decided we can’t know what prices will be charged until we know the cost of land and the transaction tax rate. We know the transaction tax rate in RL (sales tax) tends to be 10% and less. People often shop online or outside their state of residence to avoid sales tax. So, we have good experience to tell us the Sansar tax rate can be expected to influence sales volume, prices, and user retention.

For a better understanding of the effects of tax rates read up on the Laffer Curve. To learn what tax rates can teach us about government agenda study the Rahn Curve.

We don’t know what the Lindens will decide is the most productive tax rate. They will be having to deal with the factors you’ll find affect the Laffer Curve. Merchants will have to deal with what people are willing to pay for an item and balancing that against their production cost.

Another factor is the SIZE of the market. Second Life has an active user base of about a million users. Will Sansar have more or fewer users? We can’t know. I think a number of us think Sansar will have way more users. While some think way more, others think from a few more to none. The number of users will affect price based on the economics of scale. The idea being if you’re only ever going to sell a few copies of an item, you have to make your desired profit on those few items, meaning it will likely cost more. If you expect to sell a million copies of something, the profit margin can be very small, meaning it will cost less.

Another consideration is the Desura Factor. When the Lab purchased Desura, a game developers’ site and market, I expected an effort would be made to allow or encourage SL merchants to sell into other worlds. It didn’t happen, AFAIK, at least not at a level I expected. But, with VR taking off and Sansar supposedly being designed to encourage better design practices, we may see SL/Sansar designers selling into the larger VR space. We already see other worlds, like Mivvo, that are being built as SL knockoffs. Plus, those designing for other worlds may put more effort into marketing in Sansar.

The possibility is even if Sansar is no bigger, user-count-wise, than Second Life the merchants may have a much larger potential customer base. That has the possibility of reducing prices.

Some think that if you charge more for some similar thing in Sansar than you do in SL, you’ll be seen as price gouging. Their thought is avoid the hassle and charge the same price. Of course one just needs to create an Alternate Avatar with a different name to avoid that hassle.

Some think that if the Lab charges a 30% transaction/sales tax that prices will go up by 30%. So, my L$50 Model Shape Tool would sell in Sansar for 130% of the SL price or L$65. Whether that is true is a matter of a factor called ‘Price Elasticity’ or may be the flip side of the coin ‘inelasticity’ is easier to understand.

Will raising the price of goods in the SL market place decease sales? If the prices are highly elastic, yes. But, not all products have the same price elasticity. Some are inelastic. So, some merchants could raise prices while other would not be able to. It depends on the product.

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